Not all banks are cutting new purchases of third-party funds

As some of Canada’s big banks face scrutiny over decisions to pare back their product shelves for branch-based retail advisors, other banks are continuing to offer third-party funds in the face of incoming reforms.

Investment Executive (IE) reported in August that branch-based advisors at Toronto-Dominion Bank, Royal Bank of Canada and CIBC would no longer offer new purchases of third-party products as they prepare for know-your-product (KYP) requirements that take effect at the end of this year. The new rules are part of the Canadian Securities Administrators’ client-focused reforms (CFRs).

Edmonton-based Canadian Western Bank (CWB), also known as CWB Financial Group, offers a mixed shelf of funds at both its banking centres and private wealth arm that focuses on high-net-worth investors, CWB Wealth Management. That practice will continue — with adjustments — a spokesperson said in an emailed statement.

“At CWB banking centres, where we serve retail clients, we will continue to offer third-party products (in addition to [the CWB Onyx Managed Solutions]),” the bank said. “Such third-party products will be a reduced offering than before the reforms, but we will still have options available.”

Meridian Credit Union Ltd., headquartered in St. Catharines, Ont., also said third-party products will remain on offer for retail clients.

“Financial planners can offer investment solutions from a range of leading asset managers including, but not limited to, proprietary solutions offered by [Toronto-based] Aviso Wealth and its dealers,” said James Antonio, director of wealth sales support and solutions at Meridian.

Aviso Wealth is owned 50% by Desjardins Group, and 50% by a partnership comprising the five provincial credit union centrals and the CUMIS Group.

Meridian serves retail clients through both its branch-based financial planners and senior wealth advisors that cater to the high-net-worth segment. Together, they account for the vast majority (89%) of Meridian’s assets under administration, with the senior advisors making up the lion’s share.

The senior advisors have “a more expansive product shelf,” Antonio said.

He noted that Aviso Wealth narrowed the product suite available to Meridian’s mutual fund-licensed financial planners in 2019. But, he said, the list “is expansive enough” to offer advisors choice while meeting KYP requirements and personalized planning commitments.

The credit union is working with Aviso Wealth to introduce new tools to help advisors meet KYP requirements, he added.

Other institutions are sticking to in-house products.

Bank of Montreal said in an emailed statement that its branch-based financial planners “do not recommend or proactively sell third-party funds.” Clients can transfer in outside products from other accounts and BMO will accommodate additional investment in those funds, the bank said.

BMO also offers funds of funds that include third-party products. Clients seeking more choice can use self-directed platform BMO Investorline or full-service brokerage BMO Nesbitt Burns, the statement said.

Bank of Nova Scotia declined to comment on its third-party product use. In an emailed statement the bank confirmed that it’s implementing extra product and CFR training for branch advisors. In July, the bank told IE it wasn’t making product changes.

National Bank of Canada’s in-branch advisors don’t currently sell third-party funds to clients and that won’t change. But the bank plans to allow the transfer in of third-party funds through a new investment platform for its branch-based advisors, said a spokesperson in an emailed statement.

Nancy Paquet, senior vice-president, strategy, investment and savings, retail banking, told IE in June that the bank “did simplify its product lineup” ahead of the reforms. This led to some strategic and managed portfolios being cut and merged into other products, she said.

Advisors working at caisses branches operated by Levis, Que.-based Desjardins Group will stick to selling only Desjardins product. In an emailed statement, the company said only its independent advisors (with divisions such as Desjardins Financial Security Investments, or SFL Investments, and Desjardins Financial Security Independent Network) can offer outside products.

“Effectively, this practice isn’t going to change,” the statement said. (Sept. 20: A Desjardins spokesperson provided an update noting that Signature Service branch-level advisors may sell third-party products; they focus on clients with assets of at least $250,000.)

The Ontario Securities Commission (OSC) wrote to the banks this week to voice concerns about limiting product shelves.

“The intention of the client-focused reforms is to give investors access to products that best serve their needs — not to cause a move to proprietary shelves,” said Kristen Rose, manager, public affairs with the OSC, in a statement.

The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) called the banks’ decision “deeply disappointing” in an open letter.